Author: Patrick J. PurcellPublisher:
ISBN:
Category : Price indexes
Languages : en
Pages : 13
Book Description
Progressive Price Indexing of Social Security Benefits
Author: Patrick J. PurcellPublisher:
ISBN:
Category : Price indexes
Languages : en
Pages : 13
Book Description
Indexing Social Security Benefits
Author: Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Under current law, Social Security benefits increase from one generation to the next at the rate that the national average wage rises. In other words, initial Social Security benefits are wage-indexed. Once enrolled in the program, beneficiaries' Social Security checks increase each year at the same rate as the Consumer Price Index (CPI); that is, they are price-indexed. Due to increases in worker productivity, wages tend to rise faster than prices when measured over long periods of time. Consequently, if initial benefits were based on the rate at which prices rise rather than the rate at which wages rise, initial benefits for each succeeding generation of workers would grow more slowly than under current law. The growth of Social Security benefits over time can be measured against either the rate of growth of prices or wages. If benefits grow faster than the rate at which prices rise, the benefits increase in purchasing power, and future retirees will enjoy higher standards of living than today's retirees. If benefits grow at the same rate as prices, purchasing power is unchanged, and future retirees will be able to maintain a standard of living similar to that of today's retirees. Benefit levels that grow more slowly than the rate at which prices rise will decline in purchasing power, resulting in falling standards of living for future retirees. Because Social Security benefits are wage-indexed, the purchasing power of benefits rises from one generation of workers to the next, and the replacement rate -- initial benefits as a percentage of workers' career-average earnings -- remains constant for each successive generation of workers. If benefits were price-indexed, the purchasing power of benefits would remain constant for each generation of workers, and replacement rates would fall. Price-indexing would make small annual reductions in initial benefits, but the cumulative reduction would be substantial when compounded over many years. This could have serious implications for the retirement income of low-wage workers. Price-indexing benefits also would make deeper cuts in benefits if wages grow faster than projected, even as Social Security's financial situation would be improving. Likewise, if wages grow more slowly than projected, price-indexing would make smaller cuts in benefits, leading to a larger financing deficit. One way to preserve benefits for low-wage workers would be to progressively price-index initial benefits. Initial benefits of low-wage workers would continue to be fully wage-indexed, the benefits of average-wage workers would be based on a mix of wage-indexing and price-indexing, and the benefits of high-wage workers would be fully price-indexed. President Bush has suggested that Congress consider progressive price-indexing of Social Security benefits. The Social Security Administration (SSA) has analyzed a method of progressive price-indexing that would continue to wage-index Social Security benefits for workers with careeraverage earnings in the lowest 30% of the earnings distribution. SSA has estimated that this proposal would eliminate about three-fourths of the program's 75-year unfunded liability. One consequence of this method of progressive price-indexing would be that, eventually, all workers with earnings in the top 70% of the earnings distribution would receive the same benefit. This report will not be updated.
Distributional Effects of Price Indexing Social Security Benefits
Author: Mark SarneyPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This policy brief compares five options (four progressive price indexing and one full price indexing option) set forth by the Social Security Advisory Board to index initial benefits to price growth. It examines the distribution of benefits of Social Security beneficiaries aged 62 or older in 2030, 2050, and 2070 using Modeling Income in the Near Term (MINT) model projections. The brief finds that the full price indexing option Shield 0% would more than achieve long-term solvency by reducing benefits by about 35 percent in 2070 and would increase the aged poverty rate compared with scheduled levels. The four progressive price indexing options (Shields 30%, 40%, 50%, 60%) would produce smaller benefit reductions by exempting varying proportions of lower earners from price indexing. Those options would not increase poverty above scheduled levels, but would reduce benefits for some low earners because their auxiliary benefits come from the reduced benefits of a higher-earning spouse. The progressive price indexing options would make Social Security more progressive compared with scheduled and payable benefits, both when looking at household benefit reductions by household income in a given year and when examining the distribution of lifetime taxes and benefits.
The Progressivity of Social Security
Author: Julia Lynn CoronadoPublisher:
ISBN:
Category : Income distribution
Languages : en
Pages : 62
Book Description
How much does the current social security system really redistribute from rich to poor? We use the PSID to estimate lifetime wage profiles and actual earnings each year for a sample of 1778 individuals, and we use mortality probabilities to calculate expected payroll taxes and social security benefits. For a given set of facts' about the net flows received by each individual, measured progressivity depends on many assumptions. This paper attempts to capture and to quantify all of the individual characteristics that are relevant to determine the progressivity of a life-cycle program like social security. We proceed in seven steps. First, we classify individuals by annual income and use Gini coefficients to find that social security is highly progressive. Second, we reclassify individuals on the basis of lifetime income and find that social security is less progressive. Third, we remove the cap on measured earnings and find that social security is even less progressive. Fourth, we switch from actual to potential lifetime earnings (the present value of the wage rate times 4000 hours each year). This measure captures the value of leisure and home production, so those out of the labor force are less poor, and net payments to them are less progressive. Fifth, we assign to each married individual half of the couple's income. The low-wage spouse is then not so poor less progressive. Sixth, we incorporate mortality probabilities that differ by potential lifetime income. Since the rich live longer and collect benefits longer, social security is no longer progressive. Finally, we increase the discount rate from 2% to 4%, which puts relatively more weight on the earlier-but-regressive payroll tax and less weight on the later-but-progressive benefit schedule. The whole social security system is then regressive.
The Regressive Impact of the Progressive Indexation of Social Security Benefits
Author: Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper shows that the "progressive" Social Security benefit cuts endorsed by President Bush in April 2005 would actually hit middle-income workers hardest.
Report of the National Commission on Social Security Reform
Author: United States. National Commission on Social Security ReformPublisher:
ISBN:
Category : Disability insurance
Languages : en
Pages : 298
Book Description
Changes in the Oasi Benefit Distribution Under Various Social Security Reform Alternatives
Author: Craig CopelandPublisher:
ISBN:
Category :
Languages : en
Pages : 12
Book Description
This paper examines changes in the distribution of Old-Age and Survivors Insurance (OASI) benefits (the primary Social Security program) resulting from various widely discussed Social Security reform alternatives. It focuses on five alternatives: Current-law benefits; gradually reducing benefits; increasing the normal retirement age; adopting progressive price indexing, which would affect upper-income beneficiaries more than lower-income ones; and a combination of raising the retirement age and progressive price indexing. This analysis focuses on Americans born in specific years (cohorts) whose OASI benefits commence at age 62 or older and who have not received any other Old-Age, Survivors and Disability Insurance (OASDI) benefits before that age.The PDF for the above title, published in the April 2006 issue of EBRI Notes, also contains the full text of another April 2006 EBRI Notes article abstracted on SSRN: Tax Expenditures and Employee Benefits: Estimates From the FY 2007 Budget.
Budget options
Author: United States. Congressional Budget OfficePublisher:
ISBN:
Category : Budget
Languages : en
Pages : 380
Book Description
Pensions at a Glance 2009 Retirement-Income Systems in OECD Countries
Author: OECDPublisher: OECD Publishing
ISBN: 9264060715
Category :
Languages : en
Pages : 284
Book Description
This third edition of Pensions at a Glance updates in-depth information on the key features of mandatory pension systems—both public and private—in the 30 OECD countries, including projections of retirement income for today’s workers.
Public Finance and Public Policy
Author: Jonathan GruberPublisher: Macmillan
ISBN: 9780716786559
Category : Business & Economics
Languages : en
Pages : 806
Book Description
Chapters include: "Income distribution and welfare programs", "State and local government expenditures" and "Health economics and private health insurance".